Message-ID: <1638822.1075858866814.JavaMail.evans@thyme> Date: Mon, 22 Oct 2001 06:45:52 -0700 (PDT) From: vance.meyer@enron.com To: karen.denne@enron.com, pr <.palmer@enron.com>, j..kean@enron.com Subject: Arthur Anderson Question Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Meyer, Vance X-To: Denne, Karen , Palmer, Mark A. (PR) , Kean, Steven J. X-cc: X-bcc: X-Folder: \SKEAN (Non-Privileged)\Kean, Steven J.\Deleted Items X-Origin: Kean-S X-FileName: SKEAN (Non-Privileged).pst FYI -- Here is the Arthur Anderson question that an employee asked recently -- it was on eSpeak. Vance Mr. Lay- Enron has been aggressive in the use of SPV's collateralizing future cash flows for the sake of present earnings. I couldn't help but notice our auditor, Arthur Andersen of Houston, recently admitted guilt and paid the largest fine ever for criminal falsifications related to SPV's on behalf of another large Houston corporation. You are a man of integrity, so my "question" is a chance for you to so reassure us we have no such problems here at Enron. KEN.LAY REPLIES To begin with, I can assure you that I or the Board of Directors, would not approve the use of any SPVs or other types of financial vehicles unless we were convinced both by all of our internal officers as well as our external auditor and counsel, that they were legal and totally appropriate. That is the standard that we have used for as long as I have been with Enron, and we will continue to use. In many cases, not only has the local Arthur Anderson office approved these vehicles, but they have also been approved at Arthur Anderson's headquarter office from some of the world's leading experts on these types of financing. Now having said this, in the case of LJM2, which was a related party transaction, of which virtually every Fortune 500 has such transactions, because there was significant static raised by that within the financial markets, that was restructured so that there is no related party involved at the current time. In addition to both approval internally and externally, certainly I or the Board also apply the concept of what appears to be right, using a great deal of experience and common sense. And I believe overall, this has led to both creative transactions, which are beneficial for the company and its shareholders, as well as an abundance of safeguards that what is done is totally appropriate and acceptable.